“PFC Independent Directors Question ₹20,000 Crore Loan to SP Group”

Independent directors at Power Finance Corporation Ltd. (PFC) have raised significant concerns about a recent loan approval to the Shapoorji Pallonji Group (SP Group). The loan, amounting to approximately ₹20,000 crores, has prompted scrutiny due to its allocation and collateral details. The issues are expected to be discussed in a board meeting scheduled for August 6, according to sources familiar with the matter.

PFC, a state-owned entity primarily focused on the energy sector, has been criticized by its independent directors for approving a loan for SP Group’s infrastructure business, which is deemed non-core to PFC’s operations. Additionally, the loan’s collateral—initially proposed as shares in Tata Sons—has been substituted with a land parcel in Mumbai, raising further concerns among the directors. The current collateral covers only 1.75 times the loan amount, which the directors find inadequate.

Another point of contention is the use of the loan to repay SP Group’s foreign lenders, which some directors view as a bailout from default rather than a standard refinancing operation. The loan includes a moratorium on the principal amount for four years, adding to the complexity of the situation.

An independent director, speaking on condition of anonymity, indicated that these issues will be addressed at the upcoming board meeting.

PFC has yet to comment on the matter. Meanwhile, shares of PFC have fallen 5.6% to ₹496.75, although they are up 25% for the year 2024.

In response, SP Group has defended the loan, stating, “The SP Group has a long history of contributing to infrastructure development. The refinancing of loans, well ahead of their maturity, should not be mischaracterized as a bailout. The terms of the deal and collateral details reported are incorrect and do not reflect the actual agreement.”

The situation continues to evolve, and the board meeting will likely provide further clarity on the issues raised.